Bank Bonds That Cut Risk Draw Ares and Blackstone: Credit Weekly
- Magnetar and KKR have also been buying the securitizations
- JPMorgan sees one part of the market growing to $60 billion
Blackstone headquarters in New York.
Photographer: Michael Nagle/BloombergThis article is for subscribers only.
Banks are reviving the sale of credit-linked notes, a type of synthetic securitization that’s been relatively uncommon in the US since the financial crisis, ahead of new rules that will require them to hold more regulatory capital.
The bonds are used by lenders to reduce the financial resources they have to retain against loans on their balance sheet. By including a credit default swap in the notes, the issuer can effectively transfer credit risk tied to a pool of loans — such as mortgages or auto debt — to investors tempted by yields of more than 10% in some cases.